Loss Prevention with RFID

When it comes to preventing loss, many managers are trained to focus their attention on the most expensive assets with the easiest chances of getting damaged, misplaced or stolen. If we understand that preventable damage is often a case of a tool in the hands of an unqualified person, then virtually all of the loss can be grouped into knowing and controlling where an item is located and who has/had it.

It makes sense that an RFID solution can help to prevent these kinds of losses by tagging items and using the software to learn where an item is currently, where it’s been in the past and who’s had it all this time. The real question facing these management teams is, what’s the ROI on a system like this. As we discussed, the ROI is often evaluated as to the cost of the items that may be lost. At what point does it make sense to spend a thousand dollars to track and alarm on the location of a $100 hand tool. Obviously, you’d have to be losing $100 hand tools on a regular basis to justify a tracking system for it. But what if it takes two or three people a few hours to find that hand tool. What if you have to go through a purchasing process to buy a new one. Or, what if you have to stop production because of a missing tool.

Time is Money

One of the most important facts that management must understand is that the cost of labor is often the most expensive part of any operation. Someone who looks at payroll easily understands that it doesn’t take long for a single worker to rapidly turn into thousands of dollars spent by the business. It’s hard enough to justify payroll expenses even when things are running smoothly. But how fast can thousands of dollars be wasted when an operation isn’t running smoothly.

When you look at preventable loss from the perspective of payroll. The cost of lost labor can quickly dwarf the cost of a lost hand tool. Imagine managing a facility where employees make $40/hr (nurses, engineers, technicians, etc.) and they’re walking around looking for a critical tool they need to do their job. As they’re looking for the missing tool, they’re disrupting their coworkers while they ask if anyone knows where it’s at. After an hour, they may send out an email to the department asking about it, which in turn, is the same as paying everyone to provide input and investigate the location of the missing tool. Eventually, the tool is determined to be lost and a new one must be purchased. The same $40/hr employee must now take the time to complete a requisition, justify it to their boss who needs to approve it and then submit it to purchasing for a new one to be ordered. On top of all this, if the job can’t be completed because of the missing tool then the additional cost of production loss can also be astronomical. As a manager I would quickly determine that $40/hr leads to $360/day plus the loss of productivity would make me want to have multiple replacement $100 hand tools available. But what if the missing item is something more irreplaceable like keys. The cost of a key is insignificant, but the loss that could be experienced by someone taking it home or leaving it in the wrong place could be significant.

I talk to managers all the time who tell me stories about how they don’t understand how workers can be so careless and loose things. They all wish there was some way to put a sticker on their stuff and know where it’s going. When I tell them that there are such stickers and a solution already exists, their first response is “but how do I justify the cost of an RFID solution for these $100 items?”. Once we start to talk about the loss of time, it quickly becomes clear that a tracking solution is the right answer.

RFID tags can be as low as $0.10 to $0.15 per tag. But like any facility rooted implementation, the startup cost of an RFID solution is primarily based on the hardware. Just like you can’t have a surveillance system without buying cameras, you need to put in an RFID reader in order to read the RFID tags. Reader costs are getting more affordable every day and many commercial readers are comparable to the price of a computer.

When people finally get the approval to implement an RFID solution, the piece that is often thought of too late is the software. Similar to how big computer companies like Dell and HP need other companies like Microsoft to make the software, most of the RFID hardware companies don’t write software. It’s important to consider all aspects of the solution together or you may wind up with an RFID system that isn’t designed to fit your requirements.

Similar to putting solar panels on your roof, it’s best to consult with industry professionals before going online and simply buying the cheapest RFID reader you can find. At InformaTrac, we work with you to spec out the right hardware and software that meets your needs and won’t break your budget. While some sales guys out there will try to convince you that their solution can do anything, our consultants would prefer to help you make a smart decision. Even if that means not buying from us.

Feel free to contact an engineer at InformaTrac for a free consultation at (805) 283-4239 or click here for more information.